Current and future issues facing the concept of BO

Abstract

The final chapter 7 sums up the entire analyses, indicating that from its emergence in the first tax treaties (1942) through its evolution in international tax law until now (2022), the concept of BO remains a 'strange tax animal' - a kind of a chameleon that takes colour from the facts and circumstances of a given case and the desires of the entities that apply it. The hyper contextual and malleable nature of that concept allows tax authorities and courts to see it as a legal concept, and at other times as an economic-factual concept, depending on the desired effect they want to achieve in a specific case by means of its application. A structural global map of evolving OECD views and judicial trends in the understanding of BO only in a minority of cases leads to the treasure of an autonomous international meaning of that concept, which then allows for its uniform and predictable application. In the majority of cases, this map leaves interpreters completely lost in the maze of blurred and diverging meanings of the concept of BO, relentlessly taking us closer to the end of that concept. In that regard, one of the main conclusions of this study is that the concept of BO in international taxation is redundant, paradoxical, and harmful and therefore it would be best to delete it from the OECD Model and IRD as soon as possible. However, it seems that this is an unlikely future of that concept, since the OECD and the EU are very busy redesigning the international tax regime via Pillars One and Two. Despite an unclear message from the OECD and the diverging tax jurisprudence, it is the final contention of this study that the concept of BO, as interpreted in accordance with the canons of interpretation relevant to that concept, may serve mainly to ensure the proper application of Artt. 10, 11 and 12 of the OECD Model or the UN Model. To this end, the concept of BO is principally a kind of allocation of income rule in cross-border situations, rather than an antiabusive rule. The same is valid in relation to the Interest and Royalites Directive (IRD). As a rule of income allocation, the concept of BO is implicit to all tax treaties and EU directives, since it reflects their basic logic of operation, i.e. no treaty/directive application without an actual and effective allocation of income from a source country (SC) (contracting state or EU member state) to a recipient from an resident country (RC) (CS or EU MS). This chapter finally explains why tax authorities and most courts give an antiabusive function to the concept of BO, despite its wording not including abusive premises and given that the interpretative sources of its understanding are by no means clear and consistent in that regard. In addition to the legal reasons, as explained in the previous sections, this phenomenon can, chapter 7 goes on, be explained by international tax law slipping into the domain of biosemantics, also called teleosemantics, whose creator is Ruth Millikan. To demonstrate this, the final chapter briefly depicts the fundamentals of biosemantics and behavioural sociology, which explains why tax authorities and most courts behave like beavers while applying the concept of BO.